Cardica, Inc. Change in Control Severance Benefit Plan

Exhibit 10.25

Cardica, Inc.

Change in Control Severance Benefit Plan

Section 1. Introduction.

          The Cardica, Inc. Change in Control Severance Benefit Plan (the “Plan" ) has been established effective February 11, 2009 (the “Effective Date" ). The purpose of the Plan is to provide for severance benefits to certain eligible employees of Cardica, Inc. (the “Company" ) whose employment with the Company is involuntarily terminated in connection with a change in the control of the Company. This Plan supersedes any previously established or maintained severance benefit agreement, plan, policy or practice applicable to any of the Company’s eligible employees in connection with a Qualifying Termination, whether formal or informal, written or unwritten. This Plan also supersedes any employment agreement between the Company and an Eligible Employee regarding such individual’s rights to severance benefits in connection with a Qualifying Termination. This Plan document also is the Summary Plan Description for the Plan.

Section 2. Definitions.

          For purposes of the Plan, certain terms are defined as follows:

           (a) “Base Salary” means the Eligible Employee’s annual rate of base pay (excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation).

           (b) “Board” means the Company’s Board of Directors.

           (c) “Bonus Amount” means (1) the average annual incentive bonus paid to the Eligible Employee in the two most recent full bonus years or (2) if the Eligible Employee has not been employed by the Company during the entirety of the two most recent bonus years, the Eligible Employee’s target annual incentive bonus for the year of termination.

           (d) “Cause” means any of the following events occurs (as determined in good faith by a majority of the members of the Board who are not the Eligible Employee in question):

                (1)  the Eligible Employee’s conviction of, or a plea of nolo contendere with respect to, a felony involving moral turpitude;

                (2)  willful and continued failure by the Eligible Employee to substantially perform the Eligible Employee’s assigned duties after written notice and a reasonable opportunity to cure (if capable of cure);

                (3)  any (x) willful engagement in fraud or dishonesty in the Eligible Employee’s performance of duties to the Company or (y) willful misconduct or gross negligence independent of the Company, in each case under clause “y” of this Section 2(d)(3) that has a material adverse impact upon the operations, business, affairs, reputation or valuation of the Company; or

                (4)  willful noncompliance by the Eligible Employee with any material written policy of the Company or any willful breach of any material written agreement between the Eligible Employee and the Company, in either case, which has a material adverse impact on the operations, business affairs, reputation or valuation of the Company.

           (e) “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

                (1)  any Exchange Act Person becomes the owner, directly or indirectly, of securities of the Company representing more than thirty-five percent (35%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of ownership held by any Exchange Act Person (the “Subject Person" ) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

                (2)  there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their ownership of the outstanding voting securities of the Company immediately prior to such transaction;

                (3)  the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur;

                (4)  there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or

                (5)  such other transaction or series of transactions as may be determined by the Board in its discretion.

     Notwithstanding the foregoing, the term Change in Control shall not include: (A) a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, (B) the sale of equity securities by the Company in a transaction consummated principal for capital raising purposes in which cash is received by the Company, or indebtedness of the Company converted or cancelled, or any combination thereof, in exchange for such equity securities, or (C) a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their ownership of the outstanding voting securities of the Company immediately prior to such transaction.

           (f) “Code” means the Internal Revenue Code of 1986, as amended.

           (g) “Director” means an Eligible Employee who is employed at the level of a director.

           (h) “Eligible Employee” means an employee of the Company serving at or above the level of Director (i) who is notified by the Company in a writing in substantially the form attached hereto as Exhibit A (the “ Designation Form ”) that he or she is eligible for participation in the Plan and (ii) who accepts such designation by signing and returning the Designation Form within the required period. The determination of whether an employee is an Eligible Employee shall be made by the Board, in its sole discretion, and such determination shall be binding and conclusive on all persons.

           (i) “Equity Awards” means all stock options, restricted stock awards, stock appreciation rights, stock unit awards, and other equity incentive awards covering the Company’s common stock that are held by an Eligible Employee and remain outstanding and unvested as of immediately prior to the Qualifying Termination.

           (j) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

           (k) “Exchange Act Person” means any natural person, entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any subsidiary of the Company, (ii) any employee benefit plan of the Company or any subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; or (v) any natural person, entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities.

           (l) “Qualifying Termination” means an involuntary termination without Cause immediately prior to, on, or within eighteen (18) months after, the effective date of the Change in Control, or a Resignation for Good Reason on or within eighteen (18) months after the effective date of the Change in Control, in either case, provided such termination of employment is a “separation from service” for purposes of Treasury Regulation Section 1.409A-1(h).

           (m) “Resignation for Good Reason” means the Eligible Employee resigns from all positions (including membership on the Board) he or she then holds with the Company (or any successor thereto) if and only if:

                (1)  one of the following actions has been taken:

                     (i)  there is a material adverse change in duties or responsibilities of Eligible Employee , including but not limited to demotion from current position; provided, however, that a change in job position (including, without limitation, a change in title) shall not be deemed a “material adverse change” unless Purchaser’s new duties or responsibilities are substantially reduced from the prior duties;

                     (ii)  there is a material reduction in the Eligible Employee’s annual base salary, except for a reduction of not more than 10% that is applicable to all Eligible Employees;

                     (iii)  the Eligible Employee is required to relocate his or her primary work location to a facility or location that would increase the Eligible Employee’s one way commute distance by more than fifty (50) miles from the Eligible Employee’s primary work location as of immediately prior to such change;

                     (iv)  the Company materially breaches its obligations under this Plan or any then-effective written employment agreement with the Eligible Employee; or

                     (v)  any acquirer, successor or assignee of the Company fails to assume

and perform, in all material respects, the obligations of the Company hereunder; and

                (2)  the Eligible Employee provides written notice to the Company’s Secretary within the 60-day period immediately following such action that the Eligible Employee believes one of the actions set forth in Section 2(m)(1) has been taken; and

                (3)  such action (if possible to remedy) is not remedied by the Company within thirty (30) days following the Company’s receipt of such written notice; and

                (4)  the Eligible Employee’s resignation is effective not later than sixty (60) days after the expiration of such thirty (30) day cure period.

Section 3. Eligibility For Benefits.

           (a) General Rules. Subject to the requirements of the Plan, the Company will provide the severance benefits described in Section 4 to Eligible Employees, provided that in order to be eligible to receive severance benefits under the Plan:

                (1)  an Eligible Employee must remain on the job and satisfactorily provide services to the Company until the Qualifying Termination date.

                (2)  an Eligible Employee must execute a general waiver and release in substantially the form attached hereto as Exhibit B , Exhibit C or Exhibit D , as appropriate, within the time frame set forth therein and such release must become effective in accordance with its terms. The Company, in its sole discretion, may modify the form of the required release to comply with applicable law and shall determine the form of the required release, which may be incorporated into a termination agreement or other agreement with the Eligible Employee.

                (3)  an Eligible Employee must remain in compliance with his or her continuing obligations to the Company, including obligations under his or her Employee Proprietary Information and Inventions Agreement (such agreement, or any similar agreement, the “Inventions Agreement" ).

                (4)  in addition to any non-solicitation obligations owed by the Eligible Employee to the Company pursuant to the Inventions Agreement, an Eligible Employee must, for the period stated below after Qualifying Termination date, not induce any employee of the Company to leave the employ of the Company.

           (b) Exceptions to Benefit Entitlement. An employee, including an employee who otherwise is an Eligible Employee, will not receive benefits under the Plan (or will receive reduced benefits under the Plan) in the following circumstances, as determined by the Company in its sole discretion:

                (1)  The employee’s employment terminates other than as a result of a Qualifying Termination (including, but not limited to, a termination for Cause prior to the effective date of a previously scheduled Qualifying Termination, a termination as a result of death or disability, a termination arising as a result of the employee failing to accept an offer of employment from the acquirer/successor entity on terms that do not give rise to a right to a Resignation for Good Reason, or the employee voluntarily terminates employment with the

Company other than as a Resignation for Good Reason). Voluntary terminations include, but are not limited to, resignation, retirement, failure to return from a leave of absence on the scheduled date and/or termination in order to accept employment with another entity (including but not limited to any entity that is wholly or partly owned (directly or indirectly) by the Company or an affiliate of the Company).

                (2)  The employee has not signed an enforceable Inventions Agreement covering the employee’s period of employment with the Company (and with any predecessor) and does not confirm in writing that he or she is and shall remain subject to the terms of that Inventions Agreement in accordance with its terms.

                (3)  The employee has otherwise failed to comply with the terms of this Plan.

Section 4. Type and Amount Of Benefits.

           (a) Cash Severance Benefits. An Eligible Employee who suffers a Qualifying Termination will receive the following cash severance benefits (the “Cash Severance" ) subject to the terms of the Plan:

                (1) CEO and Vice Presidents. The Eligible Employee who is the CEO or a Vice President immediately prior to the event giving rise to the Qualifying Termination shall be entitled to Cash Severance equal to the product of (1) the sum of (i) the Eligible Employee’s Base Salary in effect immediately prior to the event giving rise to the Qualifying Termination and (ii) the Eligible Employee’s Bonus Amount (such sum, the “Cash Amount" ) and (2) the “Multiple” set forth in the following table:

     The Cash Severance will be paid in a lump sum on the first regular payroll pay date following the effective date of the general waiver and release, but in no event later than March 15 of the year following the year in which the Qualifying Termination occurs.

                (2) Directors. Each Eligible Employee who is a Director immediately prior to the event giving rise to the Qualifying Termination shall be entitled to receive Cash Severance equal to four (4) months of the Eligible Employee’s Base Salary in effect immediately prior to the event giving rise to the Qualifying Termination. The Cash Severance will be paid in a lump sum on the first regular payroll pay date following the effective date of the general waiver and release, but in no event later than March 15 of the year following the year in which the Qualifying Termination occurs.

           (b) COBRA Continuation Coverage. If the Eligible Employee was enrolled in a group health ( i.e. , medical, dental, or vision) plan sponsored by the Company or an affiliate of the Company immediately prior to the Qualifying Termination, the Eligible Employee may be eligible to continue coverage under such group plan (or to convert to an individual policy) following termination under the Consolidated Omnibus Budget Reconciliation Act of 1985 (together with any state law of similar effect, “COBRA” ). The Company (or its designated representative) will notify the Eligible Employee of any such right to continue such coverage at the time of termination. If an Eligible Employee makes a timely election to continue such coverage pursuant to COBRA, the Company shall pay the applicable premiums (or shall provide coverage under any self-funded plan) on behalf of the Eligible Employee for the Eligible Employee’s continued coverage under such plans, including coverage for the Eligible Employee’s eligible dependents, for up to that number of months set forth below following the Eligible Employee’s Qualifying Termination; provided, however , that no such premium payments shall be made (and no coverage shall be provided under any self-funded group health plan) following the date on which the Eligible Employee and his eligible dependents cease (or would cease) to be eligible for continued coverage under COBRA, including but not limited to the date on which the Eligible Employee becomes covered by another group health plan,

whether through a subsequent employer or otherwise. The Eligible Employee is required to notify the Company immediately if the Eligible Employee becomes covered by another group health plan, whether through a subsequent employer or otherwise.

     No provision of this Plan will affect the continuation coverage rules under COBRA, except that the Company’s payment of applicable insurance premiums (or waiver of any cost of coverage under any self-funded group health plan) in accordance with the foregoing will be credited as payment by the Eligible Employee for purposes of the Eligible Employee’s payment required under COBRA (or the self-funded plan). Therefore, the period during which an Eligible Employee may elect to continue the Company’s health, dental, or vision plan coverage at his or her own expense under COBRA, the length of time during which COBRA coverage will be made available to the Eligible Employee, and all other rights and obligations of the Eligible Employee under COBRA (except the Company’s obligation to pay applicable insurance premiums in accordance with the foregoing) will be applied in the same manner that such rules would apply in the absence of this Plan. Upon the expiration of the period during which the Company pays an Eligible Employee’s insurance premiums in accordance with the foregoing, the Eligible Employee will be responsible for the entire payment of premiums for continued coverage thereafter. For purposes of this Section 4(b), any applicable insurance premiums that are paid by the Company shall not include any amounts payable by an Eligible Employee under an Internal Revenue Code Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of the Eligible Employee.

           (c) Equity Vesting Acceleration. All Equity Awards held by the Eligible Employee as of immediately prior to the Qualifying Termination shall become fully vested and, as applicable, exercisable as of the date of the Qualifying Termination.

           (d) Additional Benefits. Notwithstanding the foregoing, the Company may, in its sole discretion, authorize benefits in an amount in addition to those benefits set forth in this Section 4 to an Eligible Employee. The provision of any such benefits to an Eligible Employee shall in no way obligate the Company to provide such benefits to any other Eligible Employee or to any other employee, even if similarly situated. Receipt of such additional benefits may be subject to a covenant of confidentiality and non-disclosure and to the execution of a release.

           (e) Certain Reductions.

                (1)  The Company shall reduce an Eligible Employee’s severance benefits under this Plan, in whole or in part, by any other severance benefits, pay in lieu of notice, or other similar benefits payable to the Eligible Employee by the Company in connection with the Eligible Employee’s Qualifying Termination, including but not limited to any payments or benefits that are due pursuant to (i) any other severance plan, policy or practice, or any individually negotiated employment contract or agreement with the Company relating to severance benefits, in each case, as is in effect on the Eligible Employee’s termination date, (ii) any applicable legal requirement, including, without limitation, the Worker Adjustment and Retraining Notification Act or any state or local law of similar effect, or (iii) any Company policy or practice providing for the Eligible Employee to remain on the payroll without being in active service for a limited period of time after being given notice of the termination of the Eligible Employee’s employment. The benefits provided under this Plan are intended to satisfy, to the greatest extent possible, any and all statutory obligations that may arise out of an Eligible Employee’s termination of employment, and the Plan Administrator shall so construe and implement the terms of the Plan. In the Company’s

sole discretion, such reductions may be applied on a retroactive basis, with severance benefits previously paid being recharacterized as payments pursuant to the Company’s statutory obligation.

                (2)  If an Eligible Employee is indebted to the Company at his or her termination date, the Company reserves the right to offset any severance payments under the Plan by the amount of such indebtedness.

                (3)  All payments under the Plan will be subject to applicable withholding for federal, state and local taxes.

                (4)  If any payment or benefit (including payments and benefits pursuant to this Plan) that an Eligible Employee would receive in connection with a Change in Control from the Company or otherwise ( “Payment" ) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax" ), then the Company shall cause to be determined, before any amounts of the Payment are paid to the Eligible Employee, which of the following two alternative forms of payment shall be paid to the Eligible Employee: (A) the payment in full of the entire amount of the Payment (a “Full Payment" ), or (B) the payment of only a part of the Payment so that the Eligible Employee receives the largest payment possible without the imposition of the Excise Tax (such lesser amount, a “Reduced Payment" ). The Company shall pay the Reduced Payment only if (x) payment of the Full Amount would result in the imposition of the Excise Tax, (y) payment of the Reduced Payment would not, and (z) in the case of Eligible Employees who are not Directors, the Reduced Payment is not less than the Full Payment minus an amount of cash not exceeding the product of (I) the Multiple — 0.5 and (II) the Cash Amount.

                     (i)  If the Full Payment is made and is subject to the Excise Tax, the Company shall pay, and the Eligible Employee shall be entitled to receive, an additional payment (a “Gross-Up Payment" ) from the Company in an amount equal to (A) the Excise Tax on the Full Payment, (B) any interest or penalties imposed on the Eligible Employee with respect to the Excise Tax on the Full Payment, and (C) an additional amount sufficient to pay the Excise Tax and the federal and state income and employment taxes arising from the payments made by the Company to the Eligible Employee pursuant to (A), (B) and (C) — that is, a gross-up ad infinitim . Except as otherwise provided herein, the Eligible Employee shall not be entitled to any additional payments or other indemnity arrangements in connection with the Payment or the Gross-Up Payment.

                     (ii)  For purposes of determining whether to make a Full Payment or a Reduced Payment, and for purposes of determining the amount of any Gross-Up Payment, the Eligible Employee shall be deemed to have: (A) paid federal income taxes at the highest marginal rate of federal income and employment taxation for the applicable calendar year, and (B) paid applicable state and local income taxes at the highest rate of taxation for the applicable calendar year, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

                     (iii)  If a Reduced Payment is made, the Payment shall be paid only to the extent permitted under the Reduced Payment alternative, and the Eligible Employee shall have no rights to any additional payments and/or benefits constituting the Payment. The reduction in the Payments shall occur from the Cash Severance.

                     (iv)  The independent registered public accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall make all determinations required to be made under this Section 4(e)(4). If the independent registered public accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder. The firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and the Eligible Employee within thirty (30) calendar days after the date on which the Eligible Employee’s right to a Payment is triggered (if requested at that time by the Company or the Eligible Employee) or at such other time as reasonably requested by the Company or the Eligible Employee. If the independent registered public accounting firm determines that no Excise Tax is payable with respect to the Payment

(either upon payment of the Full Payment or the Reduced Payment), it shall furnish the Company and the Eligible Employee with an opinion reasonably acceptable to the Eligible Employee that no Excise Tax will b